Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:
A) purchase more than 20 units of good X and less than 25 units of Y.
B) purchase less than 20 units of good X and more than 25 units of good Y.
C) purchase more than 20 units of good X and more than 25 units of good Y.
D) continue to purchase 20 units of good X and 25 units of good Y.
Correct Answer:
Verified
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